The growing public scrutiny on boards in publicly-traded companies has contributed to greatly increase their focus in several areas of management, from risk management to compensation. Although the responsibilities of a board have traditionally included CEO succession management, their line of sight would have rarely gone beyond the CEO’s heir apparent. Not so anymore. More boards are now extending the scope of their oversight to consider a broader range of succession management issues, well beyond the CEO’s leadership team. There are at least three driving forces for this increased level of board engagement. First, Competitive pressure – as companies struggle to win a competitive edge over their competitors, a strong leadership pipeline remains key to success – an asset hard to build and harder to sustain. Second, CEO turnover and executive mobility - companies compete for top executive talent and transience in the executive workforce makes it challenging for an organization – let alone their board - to know at any time their executive bench strength. Finally, Board oversight expectations – boards are now expected to know – not just believe – that the company’s leadership pipeline is strong and reliable.
To effectively respond to the heightened demand for robust succession management, we advise boards and management teams to consider the following practices:
1. Conduct a robust assessment of your internal executive talent, looking at strengths and weaknesses of executives from the top senior team to two levels down.
2. Define competencies and values needed for where the market is taking your business and assess your talent against these so that your recruitment, engagement and retention efforts are directly helping build the talent needed to lead the future organization.
3. Analyze the size and importance of talent gaps between current leadership and future needs so as to focus your selection and development efforts. Conduct this analysis with a strong knowledge and appreciation of the organization’s structure, ensuring that mission-critical roles are properly prioritized and addressed.
4. Conduct executive assessment in a cyclical way, looking for opportunities for continuous improvement.
Conducting rigorous assessment of executive talent, rooted in a clear understanding of both current role descriptions and future needs is key. Leaders – the CEO and the Board – must also show their use and command of sound critical judgment for discriminating between average and exceptional talent.
